Ouch! The Payroll Tax Takes Its Toll!

As many of you know, the payroll tax cuts recently expired, which reduced 2% of consumers’ take-home pay. That recently caused many retailers, including restaurants, to scale back prior expectations for revenue this year. Recall that in January in this article (click here to see it), we discussed the great outlook for restaurants for 2013 based on a report from the National Restaurant Association. Apparently, that outlook is still quite rosy, but less optimistic than before.

Key Restaurants & Food Companies Being Affected

For instance, according to an article in the Wall Street Journal last week (See the edition dated February 22, 2013, written by Shelly Banjo, Annie Gasparro and Julie Jargon), Burger King, Kraft, Tyson, and Chipotle all scaled back their revenue forecasts for 2013 or have made adjustments to their 2013 overall strategies based on these taxes. Further, these companies claim that their reduced expectations or strategy changes were based primarily from the hit that taxpayers would receive to their incomes from the increased taxes.

What Other Restaurants Are Doing About The Increased Taxes

Burger King responded by reducing the price of a Whopper, Jr. from $2 to $1.29. Last year, McDonald’s started to focus its advertising on its Value Menu, and the article above shows improved profits from that effort.

Given the shift in these tax rates, restaurants may consider adjusting their pricing down or certainly not raising prices. That seems to be the strategy employed by the restaurants listed above. Further, if these taxes do prove to be the scourge that they are being made out, it could be an opportunity for restaurant owners with cash to buy out other restaurants that struggle from the hardship.

Have you seen any signs of these taxes affecting your restaurant? We would like to hear about it!

About the author: Matthew Sanderson is a restaurant lawyer in Texas. “Good service with a smile” is his motto. Click here to find out more about Matthew Sanderson’s legal practice and how he can help you today. Follow him on Twitter @dealattorney.